4000 - Advisory Opinions
Insurance Coverage for Deposit Funds of a Chapter 13 Bankruptcy Trustee
October 9, 1987
Walter P. Doyle, Counsel
Thank you for your September 22 letter requesting an updated statement of FDIC coverage of funds held on deposit in an insured bank by a Chapter 13 bankruptcy trustee.
Our May 16, 1985 letter by Mr. DiNuzzo in this regard, which you forwarded, continues to be essentially accurate. The only changes I would make in our earlier letter would be to delete the second sentence of the second paragraph referring to deposits held in a principal/agency relationship, as well as the two words "at least" in the first sentence of the third paragraph. We regard Chapter 13 deposits to be established pursuant to a statutory trust, with the debtors' estates as the beneficial owners. Therefore the aggregation rule applicable to a principal/agency situation would not apply to Chapter 13 trustee deposits.
Assuming, therefore, that the account records of the depository insured bank indicate the fiduciary nature of the deposits, then the total interest of each debtor's estate in all such deposits at any one insured bank would be separately insured up to $100,000, to the extent such interest is ascertainable from records maintained by the depositor in the regular course of serving as a Chapter 13 trustee. Any deposit funds of a Chapter 13 trustee that cannot be allocated to a particular debtor's estate would be insured to $100,000 in the aggregate at any one insured bank.
The interest of each debtor's estate in commingled Chapter 13 trust deposits held by the trustee at a particular insured bank may be determined by a fractional or percentage computation. For example, if commingled funds of debtors for whom the trustee is acting are deposited in various banks, without specific allocation or ability to trace funds of particular debtors' estates to particular deposits, then dividing the total of all funds held for a particular debtor's estate at any given time by the aggregate funds held by the trustee for all debtors' estates would yield a fraction or percentage which, when multiplied by the total amount deposited by the trustee in commingled accounts at any one insured bank, would give that estate's dollar interest in such deposits. Each interest of a debtor estate so ascertained would be insured to $100,000 (less any directly traceable funds deposited by the trustee at the same bank that are specifically allocable to such debtor's estate). So, as a practical matter, if the trustee does not hold over $100,000, in the aggregate, for any single debtor's estate and doesn't have unallocable funds exceeding $100,000 on deposit at any one insured bank, his Chapter 13 deposits in FDIC-insured banks would be fully insured.